After first assessment in 15 years, seaside town’s residents worry as values skyrocket

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Joanne and Michael O'Shea purchased the Craignair Inn in Spruce Head Village in the Town of St. George this year to fulfill their long-time dream of owning an inn either on the West or the East coast. They were quite surprised when the town of St. George 2010 property reassessments arrived. The assessed value of the two buildings they own went up about two-fold and the assessed value of their land went up five-fold. The O'Sheas are among the many people in town who are upset over the sharp inctreases in their taxes. (Bangor Daily News/Gabor Degre)

BDN | BDN

BDN | BDN

The village of Port Clyde in the town of St. George was among the areas where property reassessments brought sharp increases in taxes. (Bangor Daily News/Gabor Degre)

ST. GEORGE, Maine — Gayle Bedigian inherited her waterfront property in this Knox County town from her aunt 26 years ago when it was worth $15,000. After the town’s first revaluation in 15 years, her year-round home is now worth almost $1 million. Bedigian, who is retired and on a fixed income, is worried about paying the extra $1,440 in property taxes to the town this year.

State law requires towns to revaluate periodically to reflect market trends and in order to divide the tax burden among property owners more fairly. Consequently, St. George’s total value rose to $896 million in 2010 — a 67 percent increase from 2009. Because of the redistribution of the tax burden, about half of the property owners will see a decrease in their tax bills, but those in higher-valued areas, such as the waterfront, will see tax increases.

“We certainly are blessed to be here. We would never have been able to do it if it wasn’t a gift. A lot of waterfront people are my friends and also have been gifted their land, and I don’t know what they are going to do,” Bedigian said. “I already know two people who are going to have to move away.”

In St. George and in most coastal towns in Maine, waterfront property values rise at a faster rate than inland properties. Town Manager John Falla said the waterfront property in St. George often is purchased by out-of-state buyers who are willing to pay higher prices, which tends to raise surrounding property values.

Thus if a town waits 15 years to revalue its properties, the waterfront property owners may not be paying their fair share, according to David Ledew, director of Maine Revenue Services’ Property Tax Division.

The town had asked assessor Bob Gingras of Parker Appraisal Co. in Falmouth to assess individual properties at 100 percent market value. That means if Gingras thought a property would sell for $1 million, he would assess it at $1 million.

Towns try to keep up with property values between formal revaluations by using municipal resources to re-estimate the values each year.

“Generally speaking, when you do have a strong market like we had in the early 2000s, and waterfront [value] is increasing at a much faster rate, to postpone a reval is to watch inequities creep into the system without doing anything about it,” Ledew said.

The other sections of town quickly increasing in value are the villages, where the stores and amenities are located, according to the town manager.

“It was my impression that the waterfront did see an increase, but also there were some interior properties [that rose in value]. This is the whole purpose of a revaluation; it picks up on trends,” Falla said. “People prefer to be in the villages now. That was obviously one [trend] in Tenants Harbor. The villages are seeing an increase in values.”

But almost all the properties increased in value, Falla said.

Bedigian, who is worried about losing her inherited property, called the valuation ill-timed.

“This is going to change the entire demeanor of St. George,” she said. “There is only so much waterfront. The families who have been on it forever will be forced out and [the town] will change. That is what happens to little towns.”

Michael O’Shea is equally frustrated. He, his wife, Joanne, and their 9-year-old son moved in late May to Craignair Inn, a 20-room seaside hotel with a restaurant. The couple paid about $1 million when they closed on the property on May 23. Three weeks later, the town’s assessor valued the property at $1.35 million.

The Craignair Inn was valued at a bit more than $600,000 in 2009.

“Our market value doubled,” Joanne O’Shea said.

She joked that aside from bringing their piano from Colorado, she and her husband haven’t done a thing to change the property value.

Now the O’Sheas face a $10,600 tax bill, up about $2,600 from what the inn’s former owners paid in 2009.

“It seems unfair,” Michael O’Shea said, as he sat at a table in his restaurant. “I’m going the distance [to fight this.] I’ll go as far as I need to for me and everybody. It is absurd.”

He plans to file for an abatement and use whatever other appeals processes are available to him.

“People’s livelihoods are at stake,” Michael O’Shea said. “You’ve got lobstermen, foresters, artists — not necessarily making a lot of extra money. In comes this staggering number and it is time to break — and have to move.”

The O’Sheas also said there was a lack of transparency in the process, and the valuation reports they received were ambiguous. One of the areas the O’Sheas found confusing was the listing of their property as a B1-10 under “dwelling description.”

“There should be a legend, a key, something. Grade B1-10? That means nothing,” Michael O’Shea said.

He said he wanted help figuring out what his report meant, so he met with some of the other property owners in town who compared reports, shared private information and tried to figure out the reports as a team. But the O’Sheas still have unanswered questions.

Their confusion stems in part from the fact the town has dozens of property categories denoted by letters and numbers in the assessor’s reports.

In addition to filing for a tax abatement, Michael O’Shea said he plans to become more involved with local government.

Not half a mile down the road from the O’Sheas is Peter Muth. He said that when communism fell in Russia, he helped as a consultant, assessing properties — mostly factories. He was angry with how St. George was assessed.

“I got enraged. It is so ridiculous,” Muth said.

His property value almost doubled since last year, but he isn’t worried about paying his taxes; he is worried about his neighbors not being able to pay theirs.

“Fortunately we are in a position to pay for it, but some people are not,” Muth said at his oceanfront home.

Maine statute requires towns to be valued at least at 70 percent of fair market value. St. George had slipped to about 63 percent, although the town had been raising property values each year for tax purposes. The bigger problem, according to officials at Maine Revenue Services, is that St. George was violating Maine’s Constitution by not divvying up the tax burden fairly.

Falla explained that with the town’s value rising 67 percent, a property owner’s taxes remained the same if the property’s value also rose 67 percent. If the property’s value rose more than 67 percent, the taxes rose. Conversely, if a property’s value rose less than 67 percent, taxes on it were reduced.

According to Falla, almost every property’s value rose because of the revaluation, but only about half of those owners will see an increase in taxes.

Assessor Gingras said St. George is pretty typical. He said a rule of thumb is that property values double every 10 years. “That is standard,” Gingras said in a recent phone interview.

Gingras said some of the shock for residents might be because the town had been readjusting property values each year without a formal revaluation. The formal process is costly; this year the town paid $165,000 for the work.

“It wasn’t really last year’s values,” Gingras said. “There is one of the big problems.”

On Monday night, the St. George Selectboard, which also acts as the town’s assessing board, voted to lower the tax rate from $12.50 per $1,000 of value to $7.30 per $1,000. Falla said the action was a direct result of the revaluation.

Property taxes are due in St. George on Sept. 30, after which they accrue at 7 percent interest.

Falla said anyone with questions should call the town office at 372-6363.

People having difficulty paying their taxes can visit the Maine Revenue Services website for a list of property tax relief programs and exemptions. The website is maine.gov/revenue/homepage.html.